New tax law extends business tax incentives

Washington National Tax Services

President Barack Obama on January 2 signed into law the "American Taxpayer Relief Act of 2012", which includes permanent extensions of certain 2001 and 2003 tax provisions for individuals with incomes below $400,000, and joint filers with incomes below $450,000. For a summary of key individual tax provisions enacted as part of the American Taxpayer Relief Act, see the January 1, 2013 WNTS Insight - Congress passes fiscal cliff agreement to extend tax rates for incomes below $450,000; deal includes business "tax extenders".

As described below, the new law also includes retroactive extensions through 2013 of certain business and energy tax provisions that had expired.

The renewed business tax provisions include the research credit (with modifications), controlled foreign corporation (CFC) look-through, the exception for active financing income, and certain other provisions that expired at the end of 2011. The legislation also extends through 2013 certain energy tax provisions, and modifies the expiration date for the renewable electricity production tax credit to construction beginning before the end of 2013.

In addition, the new law extends a 50-percent bonus depreciation provision for qualified property through the end of 2013, and decouples bonus depreciation from the Section 460 percentage of completion method of accounting for assets with a depreciable life of seven years or less that are placed in service in 2013. The legislation also allows taxpayers to elect to accelerate some alternative minimum tax credits in lieu of bonus depreciation.